Have you triedinvesting on Lending Club?
Six years ago, I invested $2,500 in 36 notes (parts of loans) onLending Club.
I didnt properly diversify, so loan defaults knocked my annualized return down to 5.09%.
I was happy with that, but didnt like having my money tied up for three years.
So as the borrowers paid off their loans, I emptied my account.
Its operated by a company called Folio Trading, and it lets you buy and sell existing notes.
I hope to make just 6%, but with less risk.
Ill explain my strategy below.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
But there are some distinct advantages tobuying existing noteson the trading platform.
They include:
1.
All new loans are for 36 or 60 months.
But be careful about the reason for the low price:Check the payment history.
Once your Lending Club account is open, link it with your bank account and fund it.
Then click Trading Account and open an account with Folio Investing so you might trade notes.
All of this is relatively simple and the website has a good explanation.
It shouldnt take more than a few days to transfer the money and set things up.
My Strategy for Trading on Lending Club
sign on to Lending Club and click Trading Account.
In the filter section, click More to see every option at once.
Select your criteria and choose from the resulting loans (notes).
Loan Term
I look at 36- and 60-month loans (theyre checked by default).
Outstanding Principal
I leave the defaults.
Loan Status
Issued and Current are usually checked by default.
I leave the other boxes unchecked because I dont trust loans that arecurrentlylate.
Remaining Payments
I set this for one to 15 months.
Asking Price
I set it for $0 to $50, so I can fully diversify.
My $3,000 bought 165 notes, for an average price of about $18.
Yield to Maturity
I set it for 8% to Any.
I can hit the yield column afterward to sort by highest yield, and start shopping for notes there.
Markup/Discount
I set a maximum 3% markup.
Exclude Loans
I check Exclude loans I have already invested in.
I click that to see the payment history of the note.
It takes about five seconds to see if there have been any late payments.
It took methree weeksto invest my $3,000 using the criteria above.
I had to sign on almost every day as new notes were added to the system.
Fortunately, once you know your criteria, the process is quick.
Ive spent as little as three minutes to buy a dozen notes.
Im about a month into my experiment and Ive already received payments on many notes.
SoI just invested $30(as I write this) back into a couple more notes.
This time, I bought only notes with less than 15 months left.
Ill make it less than 14 months when I reinvest next month, and continue in that way.
As I said, I hope to make about 6% after a few defaults.
Ill post an update next year.
Your Turn: Have you used the Lending Club trading platform?
If so, what was your experience?
Disclosure: We have a serious Taco Bell addiction around here.
The affiliate links in this post help us order off the dollar menu.
Thanks for your support!
Steve Gillman is the author of 101 Weird Ways to Make Money and creator of EveryWayToMakeMoney.com.
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